Can Bankruptcy Trustees Look Into Your Spouse's Accounts?
- When you file for bankruptcy, the bankruptcy trustee will first look at your personal assets to see if you can repay the debts. If you have joint assets held with your spouse, these assets are also subject to seizure by the bankruptcy court. For example, if you have a joint bank account, the bankruptcy court can gain access to the money in the account since you both technically own the money in the account equally.
When Debt Originated
- When the debt originated will also play a role in whether the bankruptcy trustee taps into your spouse's assets. For example, if the debt was originated while the spouses were married, the debt is the responsibility of both spouses. Even if one spouse accumulated the debt without the other spouse's knowledge, the debt is still both spouses' responsibility. In this situation, the bankruptcy trustee could view and use funds from the accounts of the spouse to help satisfy the outstanding debts.
- A fraudulent transfer is a process in which an individual who is filing for bankruptcy transfers an asset or money over to someone else to hold it for him. The idea is to take a property out of your possession and reclaim it again after the bankruptcy is completed. This is against the law and could result in your bankruptcy case being dismissed. The bankruptcy trustee will look back at your financial records for the last two years to see if you have transferred anything of value to someone else. If you transferred something to your spouse during that time, your spouse's account could be examined.
State Laws: Community Property vs. Equitable Distribution
- Where you live will also play a role in whether your spouse's accounts will be looked at. In states that use a community property system, all of the assets owned by either spouse are combined to form the marital estate. Other states use an equitable distribution system which tries to examine which spouse owns what. If you live in a state that uses equitable distribution, you have a better chance of avoiding the bankruptcy court taking your spouse's money.